The document discusses source documents and the goods and services tax (GST) system in Australia. It defines key terms related to GST and outlines the types of source documents that generate accounting entries and substantiate them. It explains how GST works in Australia, including that businesses collect GST from customers and can claim input tax credits. It provides examples of how GST applies at each stage of a supply chain from manufacturer to retailer to final customer.
The document discusses source documents and the goods and services tax (GST) system in Australia. It defines key terms related to GST and outlines the types of source documents that generate accounting entries and substantiate them. It explains how GST works in Australia, including that businesses collect GST from customers and can claim input tax credits. It provides examples of how GST applies at each stage of a supply chain from manufacturer to retailer to final customer.
The document discusses source documents and the goods and services tax (GST) system in Australia. It defines key terms related to GST and outlines the types of source documents that generate accounting entries and substantiate them. It explains how GST works in Australia, including that businesses collect GST from customers and can claim input tax credits. It provides examples of how GST applies at each stage of a supply chain from manufacturer to retailer to final customer.
The document discusses source documents and the goods and services tax (GST) system in Australia. It defines key terms related to GST and outlines the types of source documents that generate accounting entries and substantiate them. It explains how GST works in Australia, including that businesses collect GST from customers and can claim input tax credits. It provides examples of how GST applies at each stage of a supply chain from manufacturer to retailer to final customer.
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CHAPTER 2 Source documents
and goods and services tax
Learning outcome To understand the different types of source documents and the operation of the goods and services tax
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-1 KEY TERMS • Australian Business Number • Business Activity Statement • Goods and services tax • GST clearing • GST-free supplies • GST input tax credits
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-2 KEY TERMS cont. • GST collected • Inventories • Instalment Activity Statement • Pay-as-you-go withholding tax • Source documents • Tax invoice
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-3 SOURCE DOCUMENTS Source documents that generate accounting entries – Sales invoices – Receipts/Cash register tape – Purchase invoices – Cheques – Adjustment notes – Memoranda – Electronic transfers
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-4 SOURCE DOCUMENTS cont. Documents that back up (substantiate) accounting entries – Sales and purchase orders – Delivery dockets – Bank deposit books – Petty cash dockets – Account statements
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-5 GST • Tax on goods and services consumed in Australia • Buyer/Consumer (non- business) bears cost of GST • Businesses act as collecting agents for ATO
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-6 GST cont. • GST-registered businesses entitled to input tax credits • GST not applied to employees’ wages • GST applied to contractor payments
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-7 REGISTRATION • If annual turnover is $75 000 or more, businesses are required to register for: – an ABN – GST
• Businesses not registered for GST do not charge GST and cannot claim input tax credits • Businesses without an ABN may have 48.5% tax deducted from payment for goods and services they provide
PPTs to accompany Accounting and Bookkeeping
Bookkeeping:Principles Principlesby & Practice AAT andbyDavid AATWillis and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-8 TAX INVOICES • Tax invoices must be provided to businesses for goods and services provided for $50 or more • Adjustment invoices (credit notes) must be provided for refunds or returns of $50 or more • Information on tax invoice must include: – supplier’s ABN – supplier’s name – customer’s name and address – date of issue – description of goods and services provided – details of price and GST-inclusive amount
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-9 WHAT IS SUBJECT TO GST? • Most goods and services provided by GST-registered businesses • Some goods and services ‘input taxed’ (e.g. most financial services and residential rents) • Some goods and services ‘GST- free’ (e.g. most foods and school fees)
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-10 INPUT TAX CREDITS • Available when businesses pay GST on goods and services used to operate the business • Not available on ‘input taxed’ goods and services • Not available unless registered for GST
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-11 GST INPUT TAX CREDITS
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-12 GST COLLECTED
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-13 GST CLEARING
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-14 GST IN MANUFACTURING A timber merchant sells wood to a furniture manufacturer for $200 + 10% GST ($20):
Activity statement $ GST on sales 20 $20 less input tax credit --
GST payable 20
The furniture manufacturer sells a dining room suite to a retailer for $500 + 10% GST ($50): AUSTRALIAN Activity statement $ TAX GST on sales 50 $30 less input tax credit 20 OFFICE GST payable 30
The retailer sells the dining room suite to a customer for $940 + 10% GST ($94):
Activity statement $ GST on sales 94 $44 less input tax credit 50
GST payable 44
PPTs to accompany Accounting and Bookkeeping: Principles & Practice by AAT and David Willis 2011 McGraw-Hill Australia Pty Ltd 2-15
